Britain's top share index posted its biggest daily rise in two months on Monday, up nearly 2 percent as manufacturing data from the world's biggest economies eased concerns over sluggish growth, offsetting uncertainty in Europe. Rising shares of mining companies also helped. London's blue chip index climbed 106.44 points, or 1.9 percent to 5,874.89.
The FTSE 100 has been tethered in a range going back to early February, with investors looking for the next catalyst to drive the index sustainably higher, following the central bank liquidity-fuelled rally that began last November. Upbeat manufacturing activity in the US in March, which echoed positive data from China over the weekend, sent the index sharply higher and lifted optimism ahead of important US jobs data on Friday.
The data drove demand for growth-sensitive assets such as miners, which had fallen 9 percent in the last month. The sector gained in tandem with copper prices as the data from world's two biggest economies soothed global growth concerns for the time being.
Rio Tinto rose 3.5 percent to be among the top gaining miners with Barclays upgrading the firm to "overweight" from "equalweight" on valuation grounds, in a review of UK-listed miners. Randgold Resources reversed early losses after the US data, although the gold miner underperformed the broader rally on concerns trouble in Mali could hit production.
The Chinese and US PMI data also prompted a rally in engineers such as Weir, up 2.8 percent, as investors gloss over the euro zone manufacturing sector, which contracted for an eighth straight month. Peer IMI climbed 2.3 percent as Citigroup said the firm was among the engineers that could benefit as Chinese purchasing managers' indexes published on Sunday showed "solid development" in the food & beverage manufacturing, electrical and transportation equipment segments. Builders merchant Wolseley, which has large exposure to the US, gained 2.5 percent.
Pearson, which has been expanding its education unit in China, was the top FTSE gainer, up 4.8 percent as Natixis hiked its target price for the British publishing group to 1,500 pence from 1,420 pence. The broker said this was to reflect a higher margin profile in the medium term for the firm's Education unit, which accounts for over 80 percent of group EBIT.
And the banks reversed early losses as risk appetite returned among investors, but the extent of the rally left some feeling the index would be open to profit taking. "This is a classic case of investors jumping in on the bandwagon and feeding the rally. I would be surprised if these gains can be maintained as we head into the year-end," a London-based trader said.
Andy Jadeja, chief technical analyst at City Index, said investors seeking to move higher face a tough ceiling to break through at around 5,870, where the 14, 20 and 50 moving averages converge, before the FTSE 100 can head back towards the 6,000 level. "Importantly the 5,877 should prove to be the decision maker. As long as the bears can keep the index below this level we could see lower prices being reached," he said.
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